Lee Wah Man Weaving Factory v. Howlap Co Ltd

Civil Appeal
No. 48/1984

Courts practice and procedure - costs on the District Court scale in High Court action - s.43(2) District Court Ordinance

Where a plaintiff instituted an action in the High Court claiming $58,790 but recovered $14,818 (the pecuniary limit of the District Court's jurisdiction being, at the time of the issue of the writ, $20,000) these were proceedings in which the District Court had jurisdiction within the meaning of those words in s.43(2) of the District Court Ordinance. The matter did not depend upon the amount the plaintiff chose to claim, but upon the amount really involved, as determined at the trial. The plaintiff was therefore only entitled to costs on the District Court scale unless the judge otherwise ordered. Solomon v. Mulliner [1901] 1 Q.B. 76 applied.

Decision of High Court affirmed.

Civil Appeal
No. 48 of 1984

IN THE COURT OF APPEAL

BETWEEN

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Coram: Cons and Fuad, JJ.A., and Kempster, J.

Hearing dates: 8th and 9th May 1984

Date of Judgment delivered: 9th May 1984

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JUDGMENT

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Fuad, J.A. :

1. This is an appeal from a judgment dated the 13th March 1984 given in the High Court in a sale of goods action in favour of the Plaintiff firm, Lee Wah Man Weaving Factory ("Lee Wah") against the Defendant, Howlap Company Ltd. ("Howlap"). There is also a cross-appeal.

2. On the 9th March 1982 the parties entered into a contract in writing under which Howlap agreed to sell Lee Wah "approximately 30,000 yards" of "100% Cotton loomstate corduroy" at the ex-factory price of $6.60 per yard. The other relevant terms of the contract were as follows -

At the foot of the sales contract appear the words: "General conditions forming part of this contract are printed on the reverse side thereof." And part of para. (4) of these conditions read -

".... Should several shipments be made against this Contract, each shipment shall be considered a separate Contract and payment shall be made for each shipment in accordance with the terms specified ... "

3. It was common ground that Howlap made only two deliveries under the contract -

4. By their Amended Statement of Claim Lee Wah averred that in failing to deliver any further quantities of the contract goods by the 30th April 1982, or at all, Howlap had repudiated the contract, which repudiation Lee Wah had accepted by the issue and service of their writ.

5. There was the usual averment that Howlap knew that the goods were bought for re-sale at a profit (after "printing and/or processing"), and the special averment that they knew that the goods were intended for re-sale to two named companies by certain specified dates, the last being the 10th May 1982.

6. Lee Wah's claim for damages was made under four heads -

7. The specific amounts claimed came to $58,790.54.

8. The defence pleadedbby Howlap in their Amended Defence, and persisted in at the trial, was that on a proper construction of the contract there was a condition precedent to the obligation to deliver any of the goods and this was that they should have been provided with a letter of credit for the full contract price (which was $198,000). As regards the two letters of credit, dated respectively the 29th March and 8th April 1982, (in respect of (a) 10,000 yards and (b) 8,000 yards of corduroy), Howlap averred that they had originally refused to accept them because they did not cover all the contract goods but that they had agreed to deliver the goods that were delivered on an undertaking given by lee Wah that a letter of credit to cover the remaining goods would be made available.

9. By their amended Reply, Lee Wah contended that there was no such condition precedent, express or implied and even if there had been, Howlap had waived it by accepting the two letters of credit in respect of the two instalments of goods delivered and were therefore estopped from relying upon the alleged condition precedent.

10. The Judge came to the conclusion that the true construction of the contract was that the parties had contemplated that there could be delivery by instalments and there was a corresponding right on Lee Wah's part to open letters of credit for the instalments. He then went on to hold that even if the construction urged upon him on behalf of Howlap were the proper one, Howlap (through the conduct of their managing director, Mr. Chan Kook-chu) had waived any such provision. Both these conclusions' are attacked by Howlap's Notice of Appeal.

11. The true construction of the contract as a whole could have been the subject of much reasonable competitive argument, but, with due respect, it did not receive adequate treatment by Counsel at the trial. There is,   for example, no indication that any consideration was given to the curiously worded provisions of para. (2) of the General Conditions, which read -

12. Be that as it may, in the light of the view I have taken on the issue of waiver, I find it unnecessary (and prefer not) to express a concluded opinion on the question whether the contract, properly interpreted, required as a condition precedent that Lee Wah should provide a letter of credit for the full $198,000 before Howlap were under an obligation to deliver any part of the goods.

13. On the waiver point, I am bound to say at once that on the evidence which the Judge decided to accept, my conclusion would have been the same; whether what occurred should strictly be regarded as a waiver or a variation of the original contract terms, the effect would be much the same.

14. However, criticism is made of the Judge's assessment of the evidence given by the parties' principal witnesses. The complaint is couched in this way -

Mr. Chan Kwok-chu, Howlap's managing director, had told the court that when the first letter of credit had been opened on the 29th March 1982 in respect of the first 10,000 yards of corduroy delivered, he had at first refused to make a delivery because the letter of credit should have covered all 30,000 yards of corduroy but he had been persuaded to do so by Mr. Lee Hon-keung of Lee Wah. He had drawn on the letter of credit as an act of indulgence. This is how the Judge dealt with this aspect of the evidence -

"Mr. Chan claimed that when the plaintiff open its first letter of credit for 10,000 yards on the 29th March 1982, he at first refused to supply any goods under it because it should have been for the full 30,000 yards, and it was only after persuasion from Mr. Lee Hon-keung of the plaintiff firm that he agreed to supply 10,000 yards and draw on the letter of credit as an act of indulgence to the .plaintiff firm. Even one such act of indulgence would have stretched my credulity somewhat, and I was even less impressed by Mr. Chan's evidence when he sought to explain away the further delivery of 3,535 1/2 yards of material on the basis of yet another act of indulgence. Here was a man claiming to insist upon a letter of credit for 30,000 yards before he would deliver any goods, yet nonetheless, when two letters of credit for lesser amounts are isseud, he delivered goods under each of them. I did not accept Mr. Chan's explanation of the two deliveries of goods being acts of indulgence. The more reasonable explanation, and the one put forward by Mr. Lee was that. Mr. Chan was completely willing to accept the two letters of credit because the understanding between the parties all along had been that letters of credit would. be issued for instalments of the goods."

15. It is also said on behalf of Howlap that in view of the findings mentioned in the paragraph I have just read, the Judge had been wrong to accept Mr. Lee's evidence about the market price of the appropriate quality of corduroy at the material time, and that the Judge ought to have accepted the evidence called by Howlap on this issue.

16. The Judge said this about the general impression he had formed of Mr. Chan and Mr. Lee -

"Not only was Mr. Lee's explanation of the letters of credit more inherently probable than that of Mr. Chan, but also, in general, I found Mr. Lee the more impressive witness and I preferred to accept his evidence to that of Mr. Chan. I am not suggesting that Mr. Lee was a perfect witness. Far from it. He was decidedly careless and forgetful in his evidence, but, nonetheless, I gathered the impression that he was basically an honest witness. I cannot say the same for Mr. Chan. The impression I gained of him was that he was prepared deliberately to mislead the court in order to avoid liability on the plaintiff's claim."

I need say no more than that in my opinion Howlap have fallen very far short of discharging the burden of showing that the trial Judge's approach to, and assessment of, the evidence, and his decision on the facts, was wrong. Despite Mr. Chain's thorough arguments, I am not prepared to reject the findings of the very experienced Judge who had the advantage, denied to me, of seeing the witnesses and watching how they gave their evidence.

17. The remaining ground of appeal was plainly misconceived. Paragraph 3 of the Notice of Appeal stated -

When the trial Judge allowed Lee Wah to re-amend their Reply he made an interlocutory order in respect of which an appeal lay as of right (leave would have been required if Howlap had wished to appeal only against the order as to costs ) and no appeal was brought within the time allowed. This Court cannot now entertain this matter. After we had indicated our preliminary view on the point of jurisdiction to Mr. Chain during argument, he finally accepted the position and then applied for leave to appeal out of time. This we refused.

18. Since I can find no merits in Howlap's appeal I am for dismissing it.

19. I now turn to the Respondent's Notice, but before I do so, it is necessary to recall that the Judge awarded Lee Wah dasmages of $14,818.95, which was the normal measure of damages on the findings of fact that he made. He held that Howlap had failed to deliver 16,464.5 yards of corduroy at $6.60 per yard, in breach of contract. The market price was $7.50 Per yard and therefore the difference was $0.90 per yard: 16,464.5 x .90 cents = $14,818.05.[And so, if my arithmetic is correct Lee Wah received 90 cents more than the Judge intended to award them!]

20. The Judge's Order regarding costs was that Lee Wah should have their costs on the District court scale and that they should only have half their costs calculated on that scale.

21. The Respondent's Notice was carelessly worded for, when read as a whole, it seemed that Lee Wah were not asking us to affirm the judgment below on the grounds specified but, instead, to vary the decision to make an award based on the normal measure of damages. However, Mr. Leung, who appeared for Lee Wah before us, abandoned all the grounds of appeal except that in relation to the order made by the Judge as to costs. Later Mr. Leung also abandoned that part of the appeal which related to the Judge's order that Lee Wah should only have half their costs (calculated on the District Court scale).

22. Mr. Leung submitted that there was no express provision in Hong Kong (similar to s.47 of the U.K. County Courts Act of 1959) which allows the High Court inappropriate eases, to award costs on the District Court scale, but conceded that the High Court undoubtedly had jurisdiction to make such an order under its general discretionary jurisdiction relating to the award of costs. However, he contended that this discretion should be exercised upon the principles of the cases which discuss the application of the U.K. Act. He argued that the Judge had not applied the right test which was that stated by Glyn-Jones J. in Hopkins v. Rees and Kirby [1959] 2 All E.R. 452: whether it would have been clear to a reasonable man in the position of the plaintiff at the time of the issue of the writ that no judge would award more than [the relevant amount awardable by the County Court]. If that were not clear, then costs should be given on the High Court scale, although a lesser amount was awarded.

23. This is what the learned trial Judge said (at pp. 141-142 of the Appeal bundle) -

"Although plaintiff has won this case, I do not think it is entitled to the benefit of the usual order that full costs should follow the event. The comparatively small amount of damages that plaintiff has succeeded in winning indicates that this was a case more suitable for the District Court than for the Supreme Court. I am therefore going to award costs on the District Court scale. Further, even on that scale, I am not going to award plaintiff all its costs but merely half of its costs. This is because a great deal of time was wasted on account of plaintiff's case being in a confused state. About half of the trial time was spent on the issue of establishing whether plaintiff was entitled to damages for the loss sustained re the contracts with its sub-purchasers. For reasons I have explained, it failed on that issue and should therefore be deprived of costs in respect of that.

The effect of my order is that plaintiff gets only half costs, and even those are merely on the District Court scale."

24. I would say here that I am by no means persuaded that the judge exercised his discretion in a manner which this Court is entitled to interfere. If I may say so with respect, he made what I consider to b e an entirely fair and appropriate order in all the circumstances, and gave full and cogent reasons for his decision.

25. Mr. Leung invited us to lay doom guidelines for the exercise of a Judge's discretion in such matters. Speaking for myself, I see no necessity for this. Decisions of this kind can, in my view, safely be left to the wisdom and experience of the Judges.

26. During the course of argument, we drew Mr. Leung's attention to s.43(2) of the District Court Ordinance (Cap. 336) which is as follows -

27. I entertain no doubt that section 43 is not, as Mr. Leung suggested, concerned only with costs in cases where there has been a transfer of an action between the High Court and the District Court; Subsection (2) stands alone. What falls for decision, it seems to me, is what meaning should be given to the words with which that subsection begins - "Where any proceedings in which the Court has jurisdiction..." ["court" is, of course, a reference to the District court].

28. I regard Solomon v. Mulliner [1901] 1 Q.B. 76 (to which we also drew Counsel's attention) of great assistance here. In construing the words "which could have been commenced in a county court" employed in s.116 of the 1888 U.K. County Courts Act (repealed), the Court of Appeal held that the test was not whether the amount claimed exceeded the jurisdiction of the county court, but whether the action is of a kind which the county court can entertain. [And see footnote No.3 to para. 720 of HALSBURY (4th Edition) Vol. 37]. A.L. Smith, M.R., referring to the words of s.116 I have just read, said at p.83-

"I read them as meaning "which could 'properly' have been commenced in the county court," both as regards the character of the action and the amount really involved. At what time is it to be ascertained whether the action is, as regards amount, properly within the jurisdiction of the county court? Not, in my opinion, at the time when the plaintiff is stating what amount he thinks fit to claim on the writ or statement of claim, but at the time when the amount recoverable is adjudicated on by the proper tribunal or otherwise ascertained by the result. It cannot depend on the amount which the plaintiff chooses to claim."

29. Although the wording of our Ordinance is different, I consider that precisely the same principle is applicable, for the import of both sets of provisions is the same I respectfully adopt the reasoning of the Master of the Rolls of the day. I would therefore hold that since the pecuniary jurisdiction of the District Court at the material time was $20,000, and only $14,818 was recovered, this was an action which the District Court had jurisdiction to entertain within the meaning of s.43(2) of the District Court Ordinance. It follows that in accordance with these provisions, costs could only have been awarded on the District Court scale unless the Judge otherwise ordered. I would add here that the cases which, apply s.47 of the U.K. County Courts Act are, no doubt, generally helpful to the exercise of the judge's discretion.

30. I would therefore dismiss Lee Wah's cross-appeal.

Cons, J.A. :

31. In the course of the last day and a half we have been taken in great detail through the evidence in this case, particularly the evidence of the plaintiff. It is suggested that although the inferences we were asked to draw from each passage would not individually suffice, taken as a whole, they showed the evidence of the plaintiff to be so unreliable that no reasonable judge could possibly have placed any reliance upon it whatsoever.

32. There are cases in which the demeanour of the witnesses is of little value and an argument of this kind could perhaps more easily succeed in this Court. In the circumstances of this case, however, the demeanour of the witnesses must have been of considerable importance. Bearing that in mind I am by no means persuaded that the matters to which we were referred, even taken collectively, are sufficient to justify our interfering with the assessment of the judge and therefore with his finding as to waiver.

33. As I read this finding, it is quite clearly a finding of what has been called in the course of argument a "limited waiver" that is to say, a waiving of the need for a letter of credit in the full amount, but not a waiving of the need for letters of credit. But even were that not so, and the waiver was of the former nature, the result would be the same. In either case the plaintiff is entitled to the full amount of damages which the judge awarded.

34. The other point raised in the appeal concerns the market price upon which the judge based his judgment. That was also a question of the assessment of evidence. There was some evidence from the plaintiff in support of the rate which the judge chose. I accept that it was not of the highest quality. But on the other hand, the evidence from the defendant had been rejected completely by the judge, and the evidence of Mr. Cheung - on which the judge made no comment except to say that he did not accept it - is not all that helpful. In the circumstances I am not persuaded that this court ought to interfere and for these reasons I would dismiss the appeal.

35. I agree with what my Lord Fuad J.A. has said in relation to costs, and for those reasons I would also dismiss the cross-appeal.

Kempster, J. :

36. I would adopt all that has fallen from my Lords, Fuad and Cons JJ.A. and agree that the appeal must be dismissed. Perhaps I should add, for purposes of clarity, that as I, like my Lord Cons J.A., read the judgment of Rhind J., he found that what was waived was the buyer's obligation to provide a letter of credit for the whole of the purchase price as a condition precedent to the seller's obligation to deliver. I also agree that it matters not how wide the waiver was, because in any event the sellers were in breach either by failing to deliver such part of the goods as was covered by the second letter of credit or by failing to deliver the goods specified at all by the end of April 1982; which repudiations or one or other of them were or was accepted by the plaintiffs by issue of the writ.

37. Turning to the cross-appeal I would only emphasize certain considerations of general importance relating to costs and they are these. In the absence of any express provisions in the Supreme Court Ordinance Cap. 4, equivalent to Sec. 51 of the Supreme Court Act 1981, the jurisdiction of the High Court to award costs must be derived from the terms of Sec. 12(2) of the Ordinance. Then, turning to judicial discretion, Sec. 43(2) of the District Court Ordinance Cap. 336, which is not limited to actions founded on contract or tort, is the Hong Kong equivalent of Sec. 47 of the County Courts Act 1959. This section was not cited to Huggins J., as he then was, in Tse Soon-cheung (No. 2) v. Ross & another ⁽¹⁾; to Rhind J. or to us. It is a section which I hope will be borne in mind by practitioners hereafter. For the reasons given by my lord Fuad J.A. the cross-appeal also must fail.

(1) [1965] H.K.L.R. 469

Representation:

Mr. B. Chain (Yung Yu Yuen & Co.) for Appellant/Defendant

Mr. F. Leung (Lo Wong & Tsui) for Respondent/Plaintiff.